Empty leasehold land in prime commercial locations and an oversized CBD with older stock are just some of the issues stymying development activity in Whangarei, according to commercial real estate operators.

Operators say the issues haven't changed since the most recent Marketbeat report was launched at the end of 2017, which said the commercial and industrial sector was suffering with these legacy issues, while more buildings were requiring seismic strengthening or recycling, leaving Whangarei with a high vacancy rate and flat rental growth.

However, the authors of the Bayleys report believe proposed infrastructure spending and government investment, a rapidly growing population base feeding residential construction activity and the wealth effect from recent house price growth underpinning retail spending could change the fate of the commercial and industrial sector.

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These economic drivers, along with an increase in tourism could see the district overcome its vacancy woes.

The report also stated that now-shelved road upgrades connecting Auckland with Whangārei would have provided Whangārei with further growth opportunities.

Last produced in 2013, the Bayleys survey revealed industrial vacancies had risen from 10.3 per cent to 12.6 per cent at the main precincts of Railway Ave South, Walton St East and the Town Basin.

The popularity of fringe locations with more modern, flexible spaces, such as Kioreora Rd, as well as poorer quality stock closer to town, was keeping vacancies high.

Ross Blomfield, commercial real estate agent with Barfoot & Thompson, agreed there was too much council-owned leasehold land clogging up the market and a surplus of empty CBD properties awaiting seismic strengthening.

Many retail tenants were negotiating cheaper contracts too, he said, and those seeking industrial land expected Whangārei land to be cheaper.

No quick fix
Retail vacancies increased from 9.5 to 9.8 per cent, with the biggest decrease seen in office vacancies, which dropped 13.8 to 11 per cent. This was due to growth in demand for spaces by government departments, as well as banking and legal/accounting professions.

"Reinvention and repurposing is required and is slowly taking shape. There is no quick fix," the report said.

Although infrastructure improvements in the CBD would boost the area, the commercial development of the Town Basin was being limited by the leasehold nature of the land there, which was controlled by local councils.

A recent decision by Northland Regional Council to dispose of several ground lease investments could lead to the invigoration of the area, it said.

The sale of the former Anderson Toyota site (corner Carruth and Reyburn Sts) and the Mitsubishi car yard site (corner Reyburn and Lower Dent Sts) were also encouraging.

Bayleys expected the Town Basin vacancies to trend downwards thanks to improvements, with "a major caveat being local council willingness to continue to freehold land they hold ground leases on", with more than 60 per cent of commercial leasehold land titles.

CBD retail space had the highest vacancy rates at 19.8 per cent, which was up from 10.5 per cent in 2013.

A steady migration of retail tenants to Okara was to blame, with the Okara Shopping Centre seeing a decrease from 10.8 per cent to 1.2 per cent vacancy.

The Okara Shopping Centre in 2002 with earthworks under way for the new Warehouse building at the former Cobham Oval site on Port Rd. Photo / File
The Okara Shopping Centre in 2002 with earthworks under way for the new Warehouse building at the former Cobham Oval site on Port Rd. Photo / File

Meanwhile, Porowini Ave was emerging as a new centre for bulk retail, anchored by the Mitre 10 complex and several larger car yards.

Northland Chamber of Commerce CEO Tony Collins said the CBD had gone through much pain but had contracted and was now on the cusp.

He said large corporations had higher seismic strengthening standards which was driving them to find new properties, but landlords were addressing the need to upgrade property stock.

He said increasing inner city living, as well as developments such as the Hundertwasser Arts Centre and Hīhīaua Peninsula, would provide opportunities for the hospitality industry, which was already seeing a boost in demand.